Arbitration is an alternative method of resolving disputes in which two parties present their individual sides of a complaint to an arbitrator or panel of arbitrators. The arbitrator, who is supposed to be neutral, then weighs the facts and arguments of both parties and decides the dispute. Arbitration may be voluntary or mandatory.
Pre-dispute binding mandatory arbitration clauses effectively amount to “take-it-or-leave-it” conditions. The consumer or employee essentially waives (often without his or her knowledge) the right to sue, or to participate in a class action lawsuit. Want a job, want health insurance, want a loan, a credit card, or a rent-a-car? You often have no choice but to give up your right to a day in court.
Arbitration for consumers, employees, or small business against big business is typically a losing battle. Arbitration is often more costly than going to court. Arbitration service providers are documented by studies to give biased rulings. It is a secret system of justice with virtually no rules and no evidence or records. Arbitrators are most often hired by providers that serve big businesses (repeat customers), not by any one individual (who may file one claim in a lifetime), and those arbitrators have a documented tendency to rule with the repeat customer and against the individual.
Generally not! Some companies print them in boxes, and a few have you sign a separate sheet of paper that contains the clause. Most companies simply make the clauses an extra paragraph of fine print in their contracts. Some companies call these clauses “Dispute Resolution Mechanism” and other equally ambiguous names.
The use of binding mandatory arbitration is increasing in all contracts. Almost all credit card companies, car dealer, cell phone service providers, computer manufactures, and even the video store require consumers to arbitrate. The use of arbitration in employment disputes is also rapidly increasing. Binding arbitration has moved into contracts between independent farmers and large agro-businesses and even between nursing home patients and nursing homes.
Yes! There are plenty of good businesses that refuse to require mandatory binding arbitration. These are usually the companies with the fewest consumer complaints. Some companies that use binding arbitration provide “opt-out” clauses that allow you to send in a letter refusing the binding arbitration clause.
Pass the Arbitration Fairness Act, a federal law that would simply declare that mandatory arbitration between individuals and big businesses is unenforceable, except when knowingly and voluntarily agreed to after the dispute arises or pursuant to a collective bargaining agreement.
Don't deal with any companies that require a mandatory binding arbitration clause. Before spending time with the seller—whether in person, online, or through the mail —ask the seller or service provider if they require a mandatory binding arbitration clause. If the seller does require a clause, tell the seller you won't buy from them and why.
Visit GiveMeBackMyRights.com to learn more about binding mandatory arbitration and how you can help!
NATIONAL ASSOCIATION OF CONSUMER ADVOCATES ©2007 NACA